CoinShares Launches Polkadot, Tezos ETPs With Staking Rewards

Germany-listed products designed to share staking rewards with investors


Blockworks Exclusive art by Axel Rangel


key takeaways

  • The Polkadot and Tezos products are designed to share staking rewards of 5% and 3%, respectively, per year
  • Products join four other physically backed Coinshares ETPs that invest in bitcoin (BTC), ether (ETH), litecoin (LTC) and XRP

CoinShares has launched a pair of physically backed crypto exchange-traded products (ETPs) designed to share staking rewards with investors. 

The digital assets investment firm’s Physical Staked Polkadot ETP and Physical Staked Tezos ETP is on Germany’s Xetra exchange.

Proof-of-stake blockchains like Polkadot and Tezos require holders to stake their cryptocurrency to add new blocks to the blockchain — which triggers a crypto reward once transactions are validated. 

A physically backed crypto ETP traditionally has a management fee and a coin entitlement — the latter refers to the number of digital assets the ETPs are entitled to hold, according to Townsend Lansing, CoinShares’ head of product.

“Typically, that entitlement would decline over time, as the issuer realizes the management fee,” Lansing told Blockworks in an email. “However, for these products, that entitlement will increase over time, [and are] accrued daily.”

CoinShares plans to share staking rewards by reducing the management fee from 1.5% to zero and by adjusting the coin entitlement daily to share annualized staking awards of 3% for Tezos and 5% for Polkadot. 

Investors have the option to redeem ETP shares directly for the blockchains’ native assets, DOT or tez. The staked coins do not move from Komainu — the custodian — and the ETP is 100% physically backed at all times.

Though institutional investors mainly consider products focused on bitcoin and ether, CoinShares’ self-directed customers have become increasingly interested in alternative coins, firm executives told Blockworks last month.

The two products are now a part of CoinShares’ lineup of physical ETPs, which launched in January. The four other offerings in the ETP range invest in bitcoin (BTC), ether (ETH), litecoin (LTC) and XRP – the native digital asset of the XRP Ledger.

The current physical ETP rosters, which have about $475 million of combined assets under management,  saw outflows of $14 million the first three weeks of 2022, according to a Monday CoinShares report. 

Overall, digital asset investment products notched inflows totalling roughly $14 million last week, the report added, breaking five straight weeks of outflows. The inflows came during a period of price weakness, suggesting that investors viewed the period as a buying opportunity.

The CoinShares Physical Bitcoin ETP, which launched in 2015, was the first product of its kind in Europe.

“We are excited to push the industry forward again with these staked ETP launches,” CoinShares Chief Revenue Officer Frank Spiteri said in a statement. “We believe that over time this will become investors’ preferred structure for ETPs tracking digital assets based on proof-of-stake blockchains.”

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